This Year A&S Disposal Corp

question 35

Multiple Choice

This year A&S Disposal Corp.distributed land that it had used as a garbage site to its sole shareholder, J.The land was worth $30,000 (basis $10,000) and was subject to a $16,000 mortgage, which J assumed.The corporation had $200,000 of earnings and profits.Ignoring any taxes that may or may not arise on the distribution, the net effect of the distribution on earnings and profits of A&S will cause it to

• A)Increase by $20,000
• B)Decrease by $10,000
• C)Increase by $6,000
• D)Increase by $10,000
• E)None of the above

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Definitions:

Discretionary Income

The amount of an individual's income left for spending, investing, or saving after taxes and personal necessities have been paid.

Fiscal Policy

Government policies related to taxation and spending that are used to influence a country's economic conditions.

Private Spending

Expenditures made by individuals, households, and businesses in the private sector, excluding government spending.

Monetary Policy

Economic strategies and decisions made by a central bank or government agency regarding the supply of money and levels of interest rates in an economy.